MBA, Others Urge Terrorism Risk Insurance Act Reauthorization
The Mortgage Bankers Association and more than 100 other organizations representing various business interests urged Congress to reauthorize the Terrorism Risk Insurance Act, which is set to expire at year-end 2020.
In a letter sent yesterday to Congress, the organizations said the September 11, 2001 terrorist attacks fundamentally changed the landscape for insuring against the risk of terrorism. “Struck with an inability to model frequency, location and the potentially devastating scale of modern terrorism, insurers were forced to pull out of the marketplace and in the months following the attacks, the inability of insurance policyholders to secure terrorism risk insurance contributed to a paralysis in the economy, especially in the construction, travel and tourism and real estate finance sectors,” the letter said.
TRIA became law in 2002 and allows private terrorism risk insurance coverage to remain available to commercial businesses, educational institutions and non-profit organizations at virtually no cost to the taxpayer. Last year the Treasury Department said the terrorism risk insurance market has been relatively stable for the past decade. “Absent TRIA, there is not sufficient insurance and reinsurance capital available to provide comprehensive terrorism coverage to U.S. insurance buyers,” Treasury said.
The letter urged Congress to promptly enact a “clean” long-term extension of the TRIA program. “Previous reforms to the program have minimized taxpayer exposure, making further reforms unnecessary,” the letter said. “The key ‘dials’ are already effectively indexed to premium growth at both the company and industry level and the federal share will continue to decrease in future years even if Congress makes no changes to the program beyond a simple change of the expiration date.”
The letter noted changes to the TRIA mechanism to increase insurer retentions could affect the ability of many insurers–particularly smaller and mid-sized companies–to write risks or markets altogether, which ultimately affects the ability of policyholders to secure adequate coverage. “Maintaining a workable federal terrorism insurance mechanism is vital for our nation’s economic security, and without adequate coverage, our ability to mitigate further economic fallout in the event of an attack would be greatly impaired,” it said. “There is no homeland security without economic security.”
The TRIA program lapsed for 12 days in early 2015 and that lapse disrupted a variety of markets, the letter noted. “We urge Congress to help provide much-needed certainty by passing a long-term reauthorization of this important program without delay,” it said.
